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The Market Today - 14 February 2019

Capital imports rise as money market investments surge                                               

The total value of capital importation into Nigeria in 2018 stood at $16.8 billion, a 38% y/y growth according to the Nigerian Bureau of Statistics in a report released yesterday. This growth was largely driven by a 61% uptick in Foreign Portfolio Investments (at $11.8 billion and 70% of total capital importation), with the headline figure also receiving a minor boost from Foreign Direct Investments (up 22% y/y to $1.2 billion and 7% of total capital imports). Lastly, the third component to capital inflows, Other Investments, came in nearly flat at $3.8 billion. Looking at FPIs, inflows into money market instruments were the most significant in 2018 at $8.5 billion (72% of total), as adverse external factors and dominating political uncertainty drove bearish investor sentiment for equity and bond investments for most of the year. While FDIs are most likely to remain lower for longer in the absence of stronger economic fundamentals and enabling policies, we expect stronger international activity in the capital markets amid a more dovish monetary stance in the U.S. and the approaching conclusion of Nigeria’s election season. Notably, stronger inflows into the I&E FX window and a spike in equity market turnover since the turn of the year serve as leading indicators of stronger FPI inflows.                                      

Market moderates amidst mild profit-taking                                             

Dragged by declines in the Oil & Gas and Banking sectors, the ASI retreated 15bps yesterday. Meanwhile, despite reduced market activity d/d, turnover remained above the 30-day average at ₦4.2 billion. Market breadth turned negative with 19 advances and 22 declines. With investors beginning to take profit on select stocks, we anticipate sustained sell pressure but expect that this would be matched by continued interest on select counters. Hence, we foresee another mixed trading session today.      

Stock Watch: UNILEVER gained 10% yesterday to settle at ₦44.00 (highest price since Oct 2018). The stock has gained 19% in the past three sessions, also representing its ytd return so far, outperforming the Consumer Goods sector: +2%.                                      

T-Bills PMA closes at lower stop rates                                            

The CBN conducted its bi-monthly T-bills PMA yesterday, where it offered and sold ₦153 billion across the 91DTM, 182DTM and 364DTM bills at stop rates of 10.97%, 13.40% and 14.95% respectively – lower than previous PMA auction stop rates (effective yields: 11.28%, 14.36%, 17.57%). Meanwhile, trading in the fixed income secondary market was largely mixed. Yields across the T-bills market advanced 3bps on average, with buy and sell interest in equal measure. Trading was more bearish across the bond space with benchmark yields advancing 14bps on average. With ₦630 billion OMO maturing today, we expect that the CBN to conduct another OMO auction to mop up liquidity. Accordingly, we foresee another mixed session across the fixed income space.